Angela Shrugged

Ayn Rand was not a particularly good writer, but she captured a point of view so well that she’s become something of an icon.

In her books, particularly Atlas Shrugged, she recounts how industrious, self-reliant, and capable people become the villain in society.

Turning logic on its head, these people are seen as the height of what ails the economy because they work to enrich themselves while neither asking anyone for help nor offering to allow others to freeload on their success.

How dare they!?

I wonder if the book has been translated into German (of course it has).

Recently the U.S., and now staff at the European Central Bank, have called on Germany to explain how it can so callously continue to run a trade surplus (selling more exports than it buys in imports), have its citizens run a high savings rate, and refrain from monetary intervention?

On what basis can the German government continue to deviate from the norm of, well, most every other developed country?

Isn’t it obvious that Germany must grow its consumer spending dramatically, erasing its trade surplus and thereby equalizing its position with other nations?

If it continues on this path, Germans will further extend their advantageous financial position as a nation. What good would that be?

If the preceding paragraph sounds like twisted logic, that’s because it is.

Blaming the Germans for doing what they should do makes no sense, and simply demonstrates the lack of financial acuity on the part of the accusers… including our government.

Hopefully Angela Merkel will simply shrug.

Unfortunately, there’s another group being attacked just the same, only they can’t turn a deaf ear. That’s us, the savers of the United States, and we just got another dose of “you don’t know what’s good for you” from the Fed Chairman-in-waiting, Janet Yellen.

In her nomination hearing Ms. Yellen spoke clearly and firmly about the Fed’s wonderful actions and how it’s helped the nation. She discussed low interest rates, and her talking points suggested these rates will be with us for years.

That’s not good news.

The only reason to keep rates low is to force a transfer from savers to bankers. This is done by keeping the yield curve steep so that banks can lend at the prevailing long rate, which is just under 4%, but borrow money from savers at next to nothing (like 0.1% interest paid on deposit accounts).

This is the same as telling savers that either we aren’t smart enough to know what to do with our own money, or we’re too callous to recognize that it’s our duty to spend this money to get the economy going.

Either way, we are the problem, and a government program of monetary theft is the answer.

The only good news in the whole thing is that we can see it coming.

The Fed in general and Ms. Yellen in particular are keen on telling the markets what lies up ahead. Now it’s up to us do something about it.

If we want to earn more than a paltry 0.1% return, and if we want to stop giving banks free access to our funds, we’ll have to do more than shrug. We’ll have to find ways to invest that can provide decent returns while not risking terrible loss.

It’s tough being in the crosshairs of the Fed, but it’s not hopeless.

Rodney

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About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.